Open a line of credit with a credit card or purchase a small piece of property?

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   Msmillarposted 3 years ago

   Open a line of credit with a credit card or purchase a small piece of property?
   
   I want to improve my credit score to buy a home. I've always paid cash, so I have no credit cards or car loans.  The lender recommended I open a line of credit with a credit card company and make small purchases and pay them immediately.  I'd rather purchase a small piece of property here in my town and make payments on the loan to improve my credit.  What would be a better choice, open a line of credit or purchase a small lot and make payment s on a small loan for it? Thank you for any advice!

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2. 85

   dburkeazposted 3 years ago

   I think you should be congratulated for not using credit and paying cash.  You don't have to improve your credit score to get a mortgage, do some research and find a mortgage company that will do Manual Underwriting.  Which means you can bring in proof of your ability to pay your bills on time (rent receipts, bank statements, receipts for large purchases, etc.) as a basis for a loan.  Playing with credit cards like your lender is suggesting is like playing with snakes, no matter how careful you are eventually you will get bitten.

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   1. 94

      Msmillarposted 3 years agoin reply to this

      Thank you dburkeaz!  I will do exactly what you suggested, ask for a Manual Underwriting.  I thought there had to be another way, but I didn't know what key words I needed. Thanks again!

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   2. 85

      dburkeazposted 3 years agoin reply to this

      Good move Msmillar, credit cards and the FICO score are the bane of the middle class.

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3. 98

   promisemposted 3 years ago

   Why not do both? Open a few credit cards with low lines of credit, such as $500, and make those payments immediately.
   
   If by buying a piece of property, you mean to build on that property, then by all means do so.
   
   A combination of a few conservative credit cards and a small mortgage payment will build up your credit score nicely. Track your score and cancel the credit cards once the score gets high enough.
   
   Otherwise, I agree with the other post. Go shopping for another lender. Also keep in mind that the ability to pay is based on both income and assets (which reflect the ability to repay the loan in case income goes down), so building your savings also will improve your ability to get a loan.

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   1. 94

      Msmillarposted 3 years agoin reply to this

      Thank you promisem,  I appreciate your help! I'm going to go along with dburkeaz just because I don't want to get involved with credit cards because I DO have a very healthy savings, there's no reason for cards. Thank you!

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